National Consumer Disputes Redressal
M/S. Natraj Hand Looms (P) Ltd. vs M/S. New India Assurance Co. Ltd. on 16 February, 2015
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 41 OF 2009 1. M/S. NATRAJ HAND LOOMS (P) LTD. Through Its Ashwani Kumar Director,
M-5, A.B.C. Induastrial Area Panipat Haryana ...........Complainant(s) Versus 1. M/s. NEW INDIA ASSURANCE CO. LTD. Divisional Office . S.D. College, G.T. Road. Panipat Haryana ...........Opp.Party(s)
BEFORE: HON'BLE MR. JUSTICE V.K. JAIN, PRESIDING MEMBER HON'BLE MR. DR. B.C. GUPTA, MEMBER
For the Complainant : Mr. Sameer Nandwani, Advocate For the Opp.Party : Mr. S.M. Tripathi, Advocate
Dated : 16 Feb 2015 ORDER
JUSTICE V.K. JAIN, PRESIDING MEMBER
1. The complainant obtained two insurance policies, one insuring its factory premises and the machinery installed therein and the other insuring the stocks including raw material and finished goods stored in the said factory premises. A fire broke out in the factory premises of the complainant on 19-05-2008. On intimation being given to the insurance company, a preliminary surveyor was appointed to estimate the loss suffered by him. Shri Ashwani Kumar, Director of the complainant company, who was looking after its day to day affairs, estimated the loss at Rs.1,00,00,000/- in the information provided to the said preliminary surveyor. Thereafter, another surveyor, M/s. Mittal Surveyors Pvt. Ltd. was appointed by the insurance company, who assessed the loss to the complainant at Rs.65,40,926/-. The aforesaid figure had been worked out after deducting the requisite depreciation. The complainant, however, lodged a claim of Rs.1,71,89,502/- comprising Rs.1,64,36,701/- for the damage to the plant and machinery, Rs.2,58,047/- on account of damage to the stock and Rs.4,94,754/- on account of damage to the building and electric installations.
2. Vide letter dated 17-11-2008, the insurance company informed the complainant that the claim had been approved for payment of Rs.65,87,847/- subject inter alia to submission of an unqualified and unconditional discharge in full and final payment of the claims. According to the complainant since it was in dire need of the money to start the business and the wedding of the daughter of its Managing Director was also fixed for 11-12-2008, it submitted a full and final receipt to the insurance company and a cheque for Rs.65,40,926/- was thereupon issued to it. After encashing the aforesaid cheque the complainant served a legal notice dated 23-12-2008 upon the insurance company, seeking balance compensation to the extent of Rs.50,00,000/- along with legal expenses. The said demand having not been complied the complainant company is before this Commission seeking payment amounting to Rs.1,56,11,539/- along with interest at the rate of 18% per annum from the date of fire till the date of payment. This includes Rs.50,00,000/- towards compensation for the mental agony.
3. The complaint has been contested by the insurance company primarily on the ground that having settled the claim for Rs.65,40,926/- in full and final settlement of its claim the complainant has no cause of action to file this complaint. On merits, it is alleged that the surveyor had rightly assessed the loss to the complainant at Rs.65,40,926/- after making requisite deduction on account of depreciation.
4. Vide letter dated 16-10-2008 the complainant wrote to the insurance company that its surveyor was asking for their consent for settlement of the claim and, therefore, the insurance company should furnish the offer of the claim settlement along with date/time by which payment would be made. This was followed by another letter to the insurance company. Vide letter dated 17-11-2008, the insurance company informed the complainant that the competent authority had approved the claim for Rs.65,84,827/- subject to its furnishing (i) unqualified and unconditional discharge as full and final settlement of the related claims from the insured, (ii) recovery of reinstatement premium for unexpired portion of the policy and (iii) other usual claim formalities. The complainant has not placed on record the communication sent by it to the aforesaid letter from the insurance company. However, the insurance company has placed on record the handwritten letter dated 24-11-2008 which Shri Ashwani Kumar, Director of the complainant company wrote to the insurance company on the letter head of the complainant company. The aforesaid letter was written on 24-11-2008 but submitted to the insurance company only on 03-12-2008. Admittedly, the cheque of Rs.65,40,926/- was delivered to the complainant company on the same date. The aforesaid hand written letter, to the extent it is relevant, reads as under:
"The Divisional Manager
The New India Assurance Co. Ltd.
G.T. Road, Panipat
Sir,
We hereby give our unconditional unqualified consent for Rs.65,87,847/- in full & final settlement of our fire claim, under policy No.353900/11/07/1100001456 & 1457.
Thanking you
Yours faithfully
Ashwani Kumar
Director
For Natraj Handlooms (P) Ltd."
It would, thus, be seen that the complainant company, through its Director, Shri Ashwani Kumar accepted a sum of Rs.65,87,847/- from the insurance company in full and final settlement of its claim. Along with the aforesaid hand written letter dated 24-11-2008, Shri Ashwani Kumar, Director of the complainant company also submitted a typed discharge voucher which, to the extent it is relevant, reads as under:
"Received from the New India Assurance Company Ltd. the sum of Rupees Sixty Five Lakh Forty Thousand Nine Hundred Twenty Six Only.
I we/agree to accept in full discharge of my/our claim upon the company under Policy No.353900/11/07/11/00001456 in respect of M/s. Natraj Handloom Pvt. Ltd."
5. The only question which arises for our consideration in this case is as to whether consent given by the complainant to the settlement of the claim for Rs.65,87,847/- was a free consent or not. Section 14 of the Indian Contract Act, 1872, which is relevant in this regard reads as under:
"14. "Free consent" defined
Consent is said to be free when it is not caused by- (1) coercion, as defined in section 15, or (2) undue influence, as defined in section 16, or (3) fraud, as defined in section 17, or (4) misrepresentation, as defined in section 18, or (5) mistake, subject to the provisions of sections 20, 21, and 22. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation, or mistake."
6. Coercion, undue influence, fraud and misrepresentation are defined in Sections 15, 16, 17 and 18 respectively of the Indian Contract Act and reads as under:
15. "Coercion" is the committing, or threatening to commit, any act forbidden by the Indian Penal Code (45 of 1860) or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.
Explanation: It is immaterial whether the Indian Penal Code (45 of 1860) is or is not in force in the place where the coercion is employed.
16."Undue influence" defined
(1) A contract is said to be induced by "undue influence" where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another-
(a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or
(b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.
(3) Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other.
Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872).
17. "Fraud defined
"Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agents , with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:
(1) the suggestion as a fact, of that which is not true, by one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Explanation: Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.
18. "Misrepresentation" defined
"Misrepresentation" means and includes-
(1) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains and advantage to the person committing it, or any one claiming under him; by misleading another to his prejudice, or to the prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement."
7. Thus, the consent given by a person would be deemed to be a free consent and would be binding upon the parties to the contract unless it can be shown that it was obtained by exercise of coercion, undue influence, fraud, misrepresentation and mistake as defined in Sections 15, 16, 17 & 18 or by mistake subject to provisions of Sections 20 to 22 of the Indian Contract Act.
8. In the case before us, there was no such relationship between the complainant and the opposite parties that the opposite parties can be said to be in a position to dominate the will of the complainant company and use that position to obtain an undue influence over the complainant Company. The Insurance Company does not stand in a fiduciary relationship vis a vis the complainant. Clause (b) of Sub- Section (2) of Section 16 concerns an individual whose mental capacity is affected by reason of age, illness etc. and is obviously inapplicable. Since the Insurance Company cannot be said to be in a position to dominate the will of the complainant, Sub-Section (3) of Section 16 of the Act would also not apply. In any case, the complainant company has failed to prove that the settlement of the claim for a sum of Rs.65,40,926/- was induced by undue influence. Section 16 of the Contract Act, therefore, is clearly inapplicable. There is no allegation of fraud against the insurance company. There is no allegation of concealment of any material fact by the insurance company from the complainant with a view to obtain the consent of the complainant company to the aforesaid settlement. Therefore, Section 17 of the Act is also not applicable. There is no allegation of any misrepresentation within the meaning of Section 18 of the Contract Act and, therefore, the aforesaid Section also does not apply.
No case of coercion is made out by the complainant company, since there is no allegation of committing, or threatening to commit, any act forbidden by the Indian Penal Code or unlawful detaining, or threatening to detain, any property, to the prejudice of the complainant, with intention of causing the complainant to enter into any settlement.
Mere financial hardship of the complainant, in our view does not constitute 'coercion' as defined in Section 16 of the Indian Contract Act. Nothing prevented the complainant company from approaching this Commission instead of entering into a settlement with the insurance company and in such a complaint the company could have sought an interim relief based upon the preliminary report of the surveyor. Such a course, however, was not adopted and the complainant company chose to settle the claim for a substantial amount of Rs.65,40,926/-.
9. The only reason given by the complainant company for giving consent to the settlement of the claim for Rs.65,87,847/- is that it was in financial difficulty on account of the losses sustained in the fire and the wedding of the daughter of its Managing Director was to take place in December, 2008. However, the complainant has not produced its account books and balance sheets to prove that the complainant company was in financial difficulties at the time the consent letter dated 24-11-2008 was given by it to the insurance company. In the absence of the requisite documentary evidence it is not possible to accept the claim of the complainant company that it was in financial difficulty at the relevant time and, therefore, had no option but to give the aforesaid consent. Had the complainant company submitted its balance sheets including the list of its assets and liabilities at the relevant time only then this Commission could have known whether it was really in a financial difficulty at the time the letter dated 24-11-2008 was given by it to the insurance company, or not. No explanation has been given by the complainant company for not producing the aforesaid documentary evidence before this Commission. Therefore, an adverse inference needs to be drawn against the complainant company that had the account books, audited balance sheets, etc., of the complainant company been produced, before this Commission, the same would not have supported the case as set out in the complaint.
10. As regards the plea that money was required for the wedding of the daughter of the Managing Director of the complainant company we are unable to appreciate how the funds belonging to the company could have been used for the said wedding. No documentary evidence has been produced before us to prove that the company owed some debt to its Managing Director at the time the letter dated 24-11-2008 was submitted to the insurance company. More importantly, the claim of the complainant is primarily on account of damage to the plant & machinery the same being as much as Rs.1,64,36,701/- out of the gross claim of Rs.1,71,89,502/- as detailed in para 7 of the complaint. We fail to appreciate how the plant & machinery could have been immediately used by the Directors of the complainant company for incurring expenditure on the wedding of the daughter of one of them. Such expenses could possibly have been incurred from the funds of the company either by repaying the debt, if any taken by the complainant from the concerned Director or by extending a loan to him out of the surplus available with it. In either case the money would have gone from the bank balance of the complainant company or from the sale of the finished stock it had. The complainant has claimed loss of stock worth only Rs.2,58,047/-. Therefore, it cannot be said that the aforesaid stock could have been used by utilizing the sale proceeds for the wedding expenditure of the daughter of one of the Directors of the complainant company. From whatever angle we may look at, it we are satisfied that the complainant company has failed to substantiate the reasons given by it to make out the case of want of free consent. Consequently, it cannot be said that the handwritten letter dated 24-11-2008 which was delivered to the insurance company more than one week after it was written, was not an act of free consent. We would like to note here that the onus is upon the person alleging want of free consent to prove that the said consent was obtained by exercise of coercion, undue influence, fraud or misrepresentation, etc.. No mistake has even been claimed by the complainant. Therefore, we have no hesitation in holding that the complainant company agreed to settlement, without being influenced in any manner on account of alleged financial difficulties, including the requirement of funds for the wedding of the daughter of its Managing Director.
11. The learned counsel for the complainant has relied upon the decisions of the Hon'ble Supreme Court in (i) (2009) 1 SCC 267, National Insurance Co. Ltd. Vs. Boghara Polyfab Pvt. Ltd., (ii) 2006 (8) SCC 461, M/s. Shobika Attire Vs. New India Assurance Co. Ltd. & Anr. and the decision dated 09-04-2009 in Civil Appeal No.3253 of 2002, New India Assurance Co. Ltd. Vs. Pradeep Kumar. He has also relied upon the decision of this Commission in Revision Petition No.532 of 1998, K.L. Malhotra Vs. Oriental Insurance Co. & Anr. decided on 15-01-2002.
In Boghara Polyfab Pvt. Ltd. (supra) the respondent/complainant had submitted an undated discharge voucher to the insurance company in the last week of March 2006. Simultaneously, he lodged a complaint with Insurance Regulatory and Development Authority on 24-03-2006 alleging therein that in March 2005, the insurance company had forced them to accept a lower settlement and thereafter a voucher was sent to them on 21-03-2006 which, considering their financial difficulties, they had no choice but to accept. Dealing with the said contention the Hon'ble Supreme Court observed as under:
"49. Obtaining of undated receipts-in-advance in regard to regular/routine payments by government departments and corporate sector is an accepted practice which has come to stay due to administrative exigencies and accounting necessities. The reason for insisting upon undated voucher/receipt is that as on the date of execution of such voucher/receipt, payment is not made. The payment is made only on a future date long after obtaining the receipt. If the date of execution of the receipt is mentioned in the receipt and the 40payment is released long thereafter, the receipt acknowledging the amount as having been received on a much earlier date will be absurd and meaningless. Therefore, undated receipts are taken so that it can be used in respect of subsequent payments by incorporating the appropriate date. But many a time, matters are dealt with so casually, that the date is not filled even when payment is made. Be that as it may. But what is of some concern is the routine insistence by some government Departments, statutory Corporations and government Companies for issue of undated `no due certificates' or a `full and final settlements vouchers' acknowledging receipt of a sum which is smaller than the claim in full and final settlement of all claims, as a condition precedent for releasing even the admitted dues. Such a procedure requiring the claimant to issue an undated receipt (acknowledging receipt of a sum smaller than his claim) in full and final settlement, as a condition for releasing an admitted lesser amount, is unfair, irregular and illegal and requires to be deprecated.
50. Let us consider what a civil court would have done in a case where the defendant puts forth the defence of accord and satisfaction on the basis of a full and final discharge voucher issued by plaintiff, 41and the plaintiff alleges that it was obtained by fraud/coercion/undue influence and therefore not valid. It would consider the evidence as to whether there was any fraud, coercion or undue influence. If it found that there was none, it will accept the voucher as being in discharge of the contract and reject the claim without examining the claim on merits. On the other hand, if it found that the discharge voucher had been obtained by fraud/undue influence/coercion, it will ignore the same, examine whether plaintiff had made out the claim on merits and decide the matter accordingly. The position will be the same even when there is a provision for arbitration."
It would, thus, be seen that the Hon'ble Supreme Court itself was of the view that when the allegation of fraud/coercion/undue influence are made by the claimants, the Court is required to consider the evidence and then decide as to whether any fraud and coercion or undue influence was actually exercised or not. If the Court finds that there was none, the discharge voucher is to be accepted being in discharge of the contract and reject the claim without examining it on merits. If, however, it is found that the said voucher was obtained by fraud/undue influence/coercion the Court is required to ignore the same and decide the claim on merits. However, in the case before us the complainant has failed to make out any case of fraud, coercion, undue influence, etc., as defined in the Indian Contract Act. The complainant has even failed to prove the alleged financial hardship claimed by it. Therefore, in view of the legal proposition ennunciated by the Hon'ble Supreme Court, the discharge voucher is required to be accepted and the case of the complainant cannot be considered on merits. Moreover, in the case before us the discharge voucher was not lying with the insurance company before it was acted upon. This is complainant's own case that the said discharge voucher was submitted to the insurance company on 03-12-2008. The payment to the complainant company was made on the same date. Therefore, no undue advantage of the said voucher was sought to be taken by the insurance company. More importantly the discharge voucher was not the only document executed by the complainant. A hand written letter dated 24-11-2008 was sent by the complainant company to the insurance company on 03-12-2008. In fact, the delivery of the letter more than one week after it had been written is an indication that a lot of thought had gone into the matter before the said hand written letter was submitted. Therefore, the facts of the case before us are entirely different.
In Shobika Attire (supra) it was held by the Hon'ble Supreme Court that where the insured discharges the initial burden placed upon him to prove the destruction, damage, etc., it is for the insurance company to disapprove such claim with evidence, if any, if the said claim was not accepted by it. The aforesaid decision has no applicability to a case where the insured accepts a particular amount offered by the insured, in full and final settlement of the claim and the offer made by the insurance company is not an arbitrary offer but is based solely upon the assessment made by its surveyor.
In Pradeep Kumar (supra), referring to the provisions contained in Section 64 UM (2) of the Insurance Act, 1938, the Hon'ble Supreme Court observed that assessment of loss by an approved surveyor is a pre-requisite for payment or settlement of claims of Rs.20,000/- or more by the insurer and the report of the surveyor is not conclusive and binding though it can be made the basis or foundation for settlement of the claim by the insurer. The aforesaid decision has no applicability to the facts of the case before us and, therefore, the complainant gets no benefit from the said decision.
In K.L. Malhotra (supra), the insured had recorded "under protest" on the receipt given by him to the insurance company while accepting the amount offered by it in full and final settlement of his claim. Subsequently, the insurance company reduced the compensation to Rs.19,268/-. This Commission felt that deduction of the amount from Rs.26,868/- to Rs.19,268/- was not justified. This decision also has no applicability to the facts of the case before us.
12. For the reasons stated hereinabove, we hold that having voluntarily accepted a sum of Rs.65,40,926/- in full and final settlement of its claim the complainant is estopped from claiming any further amount from the opposite party in respect of the claims in question.
The complaint is accordingly dismissed. No order as to costs.
......................J V.K. JAIN PRESIDING MEMBER ...................... DR. B.C. GUPTA MEMBER